Enterprises Expected To Feel Pricing Pain

SAN FRANCISCO -- Microsoft is leveraging its terms and conditions to increase revenues, and organizations using its software should expect to pay up to 50 percent more per year through 2002 as a result. That’s the warning issued by Tom Bittman, VP and research director for GartnerGroup, during a keynote at the company’s fourth annual Windows NT and Windows 2000 conference here this week. Bittman said the majority of enterprises installing or upgrading to Windows 200x technology will pay up to 80 percent more in license fees, through 2003, as compared to a deployment of Millenium Edition (Microsoft’s next 9x release) and Windows NT 4.0. Although list prices haven’t really changed, he said, "upgrade pricing has increased dramatically."

At the heart of the increases are several crucial changes to terms and conditions for licensing Windows 2000: Client Access Licenses are now required for all authenticated users (and the Windows 2000 logo compatibility program requires use of Windows 2000 authentication); authenticated Internet users now require CALs or Internet Connector licenses; a Terminal Services CAL is now required even if the organization uses an alternative vendor’s terminal server offering. The changes, according to Bittman, make it difficult for companies to "cost-justify the use of alternative vendors’ products," particularly Novell’s (www.novell.com) NDS and Citrix (www.citrix.com) MetaFrame.

A more dramatic shift in revenue will occur, Bittman said, as Microsoft (www.microsoft.com) moves from a "buying-the-bits once" revenue model to a "rental model." In the latter scenario, companies would pay for the right to use Microsoft software for a fixed period. When the period ends, the companies would pay additional fees or un-install the licenses. GartnerGroup (www.gartner.com) expects to see non-perpetual licenses becoming a standard option within Microsoft’s corporate licensing agreements by the end of this year. - Dian Schaffhauser